This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, click the "Reprints" link at the bottom of any article.

April 16, 2013

J.D. Power & Advisor Satisfaction: Behind the Numbers

While the results reflect a small number of advisors, they point to important broad trends, experts say

The latest research indicates that independent advisors are much more satisfied than their traditional employee counterparts, a continuing trend that both broker-dealers and recruiters are likely to pay close attention to in the coming year, experts say.

J.D. Power and Associates released its 2013 U.S. Financial Advisor Satisfaction Study on Thursday. It showed that—of 2,500 advisors surveyed—most work for or are affiliated with broker-dealers that top the industry average. The average, as rated on a 1-to-1,000 scale, is 695 for employee reps and 794 for independents—a nearly 100-point spread.

(The general industry figure for the total number of advisors in the United States is roughly 300,000.)

“The survey points to high levels of satisfaction amongst independent advisors,” said Mark Elzweig (left), a New York-based executive search consultant, in an interview. “As more wirehouse advisors know other advisors who have taken the plunge to independence and are happy, this will encourage more wirehouse advisors to seriously consider that option.”

Top Ratings

For the third time in a row, Commonwealth Financial Network had the highest rating among independent broker-dealers and overal, with an overall satisfaction score of 945—up from 917 last year and 50 points ahead of the second-place independent, Cambridge Investment Research.

“It is truly humbling to be the highest-ranked firm in the independent channel three times in a row,” said Commonwealth CEO Wayne Bloom, in a press release. “We take great pride in this award and attribute our strong performance to our respected advisors—who share our client-forward philosophy—and to our dedicated team who has helped shape the culture of Commonwealth into what it is today.”

On the employee-advisor side of the business, Edward Jones came out on top for the fifth time (since 2007) with a score of 907—just 38 points behind Commonwealth and 212 points ahead of the traditional channel’s average satisfaction level.

"We believe this reflects our firm’s total alignment around serving our clients and supporting our branch teams," said Edward Jones Managing Partner Jim Weddle, in a statement. "In our business model, branch teams focus on each client, while in the home office we offer support and expertise on investment guidance."

Coming out second in the employee channel (with a score of 891) and third in the independent channel (at 879) is Raymond James (RJF).

“Raymond James is pleased to score so well on the Advisor Satisfaction surveys released by J.D. Power and Associates, in both the employee and independent channels,” said Chet Helck, CEO of Raymond James’ global private client group, in a statement.

“We know advisors can be tough critics, and so to increase our scores, particularly in the areas of technology and firm performance, was especially satisfying,” Helck said. “We continue to work hard on earning our advisors’ satisfaction, each and every day.”

(Raymond James Financial Services, the independent broker-dealer, is hosting its national conference next week in the Dallas-Fort Worth area.)

-----

Next page: Room for Improvement

Room for Improvement

Tthe satisfaction levels of advisors working for three out of the four wirehouse BDs (Merrill Lynch, UBS and Wells Fargo) rose from the 2012 levels. UBS (UBS), however, was the only wirehouse with a score that topped the industry average (at 751 vs. 695).

For its part, Morgan Stanley (MS) said in a statement that it did not believe the survey results reflected the true satisfaction level of its advisors.

First, a Morgan Stanley spokesperson says, fewer than 150 out of its more than 16,000 advisors responded to the survey.

Second, J.D. Power did not ascertain whether or not these respondents were "representative of the FA population at large; given the tiny percentage who completed the survey, it is highly unlikely that they were," the spokesperson said.

But, notes Elzweig, broker-dealers ignore the J.D. Power survey results at their own peril.

“The fact the such a hefty percentage of advisors in both the wirehouse and independent channel are indifferent toward their firms underscores their vulnerability to advisor defections,” he said. “Somehow, they've got to figure out how to make their advisors more deeply committed to the home team.”

Still, at least one firm—Morgan Stanley—says it doesn’t give much credence to the survey’s implications. “In fact, FA turnover has remained fairly constant across the industry for a number of years,” a spokesperson shared.

ThinkAdvisor's TechCenter is an educational resource designed to give you a competitive edge by keeping you abreast of new tech innovations and need-to-know information that can be applied to your business.